The Cash Book serves dual purposes:
• Journal: It is a book of original entry where cash transactions are recorded chronologically for the first time.
• Ledger: It serves the function of a Cash Account and Bank Account. When a Cash Book is maintained, separate Cash/Bank accounts are not opened in the ledger.

A Contra Entry records transactions that affect both Cash and Bank columns simultaneously (e.g., Cash deposited into Bank or Cash withdrawn from Bank for office use). It is denoted by ‘C’ in the L.F. column to indicate that no posting is required to any other ledger account.

Special Purpose Books (Subsidiary Books) are subdivisions of the Journal. Instead of recording all transactions in one General Journal, transactions of a similar nature are recorded in separate books (e.g., Sales Book for credit sales, Purchases Book for credit purchases).

A Petty Cash Book is used to record small payments like postage, cartage, and stationery. It is usually prepared on the Imprest System. The head cashier gives a fixed amount to the petty cashier. Expenses are recorded on the credit side, and the book is balanced periodically.

Posting is the process of transferring debit and credit items from the Journal or Subsidiary Books to their respective accounts in the Ledger. It classifies scattered transactions into summarized accounts.

The main purposes are:
1. Division of Labour: Work can be divided among different clerks.
2. Efficiency: Saves time in recording and posting.
3. Ease of Reference: Similar transactions are found in one place.

Ledger Folio (L.F.) refers to the page number of the ledger account where the journal entry has been posted. It is written in the Journal to facilitate cross-referencing and auditing.

1. Locate the account in the ledger.
2. Enter the date of the transaction.
3. In the Particulars column, write the name of the corresponding account (prefixed with ‘To’ on Dr. side, ‘By’ on Cr. side).
4. Enter the amount.
5. Enter the Journal Folio (page number) for reference.

The Imprest Amount is a fixed sum of money given to the petty cashier at the beginning of a period to meet petty expenses. At the end of the period, the head cashier reimburses the exact amount spent, restoring the cash balance to the original fixed amount.

As a business grows, the number of transactions increases significantly. Recording everything in a single Journal becomes impractical and inefficient. Special Purpose Books (Subsidiary Books) are needed for the following reasons:

• Quick Information: Separate books for Sales, Purchases, Cash, etc., allow management to access specific information instantly without sifting through a massive journal.
• Division of Labour: Accounting work can be distributed among different clerks (e.g., one person maintains the Sales Book, another the Cash Book), improving speed.
• Specialization: Staff members become efficient and specialized in handling specific types of transactions.
• Internal Check: It becomes easier to fix responsibility and detect errors or frauds since separate individuals handle separate books.

A Cash Book is a book of original entry in which all cash receipts and cash payments (including bank transactions) are recorded chronologically. It serves the purpose of both a Journal and a Ledger.

Types of Cash Book:

• Single Column Cash Book: Contains only one column for Cash on both debit and credit sides. It records only cash transactions.
• Double Column Cash Book: Contains two columns: Cash and Bank. It records both cash and bank transactions, enabling easy reconciliation.
• Petty Cash Book: Maintained by a Petty Cashier to record small expenses (postage, cartage, stationery) to avoid cluttering the main Cash Book. It typically works on the Imprest System.

A Contra Entry is a transaction that involves both Cash and Bank accounts simultaneously. It does not lead to any net inflow or outflow of funds for the business, merely a movement between cash-in-hand and cash-at-bank.

Treatment in Double Column Cash Book: Since both accounts appear in the same book, no ledger posting is required.
1. Record on the Debit side (Receiving account).
2. Record on the Credit side (Giving account).
3. Write the letter ‘C’ in the L.F. column on both sides to indicate it is a Contra entry.

Example: Cash deposited into Bank ₹5,000.
• Debit Side: ‘To Cash A/c’ in Particulars; Amount in Bank Column.
• Credit Side: ‘By Bank A/c’ in Particulars; Amount in Cash Column.

A Petty Cash Book is a subsidiary book maintained to record small, repetitive expenses (like bus fare, postage, tea) that are too insignificant to be paid by cheque or recorded individually in the main Cash Book.

Advantages:

• Saving of Time: The main cashier is relieved of the burden of handling numerous small payments.
• Saving of Labour: Posting to the ledger is simplified as only periodic totals of expenses are posted, not individual items.
• Control: It allows for better supervision and control over small expenses through the Imprest System (where the petty cashier must account for every penny before reimbursement).
• Convenience: Small payments are made promptly without disrupting the main accounting workflow.

Sub-dividing the Journal into subsidiary books (Sales Book, Purchase Book, Cash Book, etc.) offers significant operational benefits:

• Simultaneous Work: Accounting work does not get held up. Multiple clerks can record transactions in different books at the same time.
• Efficiency & Accuracy: Specialization leads to fewer errors. A person handling only Sales becomes proficient in verifying invoices and recording sales.
• Ease of Reference: If management wants to know total credit sales, they refer to the Sales Book immediately rather than filtering a general journal.
• Detailed Information: Subsidiary books provide a classified record, making future analysis and decision-making easier.

Balancing of an account refers to the process of equalizing the two sides (Debit and Credit) of a ledger account at the end of an accounting period to determine the net position.

The Process:
1. Total both the Debit and Credit columns separately.
2. Calculate the difference between the two totals.
3. Insert the difference on the side with the smaller total to make them equal.
4. Write “By Balance c/d” (if Credit side is shorter) or “To Balance c/d” (if Debit side is shorter).

Significance: The balance represents the net Asset held, Liability owed, or Capital remaining at a specific point in time. Real and Personal accounts are balanced; Nominal accounts are closed to the Trading & P&L A/c.